China September PMIs point to upside risks for growth

The Chinese economy may be growing a bit more quickly than expected in the third quarter, a batch of closely-followed surveys for the Asian giant's manufacturing and services sector revealed, although their findings were a bit mixed.

An 'official' Purchasing Managers Index for manufacturing rose from an August reading of 51.0 to 51.5 for September, as expected.

Survey compiler Caixin's private sector factory PMI on the other hand dipped from 53.1 to 53.0, against expectations for an unchanged reading.

Despite the small miss in the latter, various readings were al multi-year highs, Miguel Chanco at Pantheon Macroeconomics pointed out.

The headline official PMI climbed to a six-month high and looking at the various subindices the improvement was broad-based, including those linked to output, new orders and employment.

Indeed, the subindex for output growth was at a seven-year high, although production appeared to be running too far ahead of demand, the analyst added.

"Encouragingly, though, the demand picture is the sturdiest it has been for a while, with the new export orders rising above 50 for the first time since the end of China’s lockdown, Chanco said.

"Nevertheless, it looks as though much of this month’s production went straight into inventories."

Imports were also growing, the survey revealed, for the first time in two years - which was good news for Japan and South Korea.

Producer price deflation also appeared to be easing.

Forward-looking indicators in the Caixin survey were also "strong" with subindices for new orders and new export orders enjoying their strongest monthly increases in nine and three years, respectively.

"Overall, the continued outperformance of the Caixin index reflects the slower initial recovery—and hence delayed catch-up—of private firms, which are better represented in this survey.

"The extent of the broad acceleration in the headline PMIs this quarter from Q2 suggests that the risks to our forecast for “true” GDP to rise by 1.2% y/y in Q3, following the 0.4% contraction in the previous quarter, are weighed to the upside. That said, the coincident signal from these surveys for GDP growth have been muddied significantly by the Covid shock in Q1."

A separate official PMI for the non-manufacturing side of the economy meanwhile printed ahead of economists' forecasts at 55.9 (consensus: 54.7), which was up from a reading of 55.2 for August.